Campalal vs Padam Chand and others

K.L. Pandey, J.

This is a defendant''s further appeal against an affirming decree of the lower appeal Court for Rs. 1,200 passed on the foot of a promissory-note dated 14 September 1958 which he admittedly executed in favour of one Shivlal for Rs. 1,670.

It is common ground that Shivlal, a moneylender, had advanced money to the defendant and the latter executed a promissory-note dated 7 October 1955 for Rs. 1,200. Subsequently, on 14th September 1958 to be more precise, accounts were made and Rs. 1,670, inclusive of interest, was found due from the defendant who then executed a fresh promissory-note for Rs. 1,670 and promised to repay that amount with interest at 1 per cent per month. The creditor, Shivlal, died in February 1960 leaving behind him surviving three sons and two daughters, Premlata and Rajmati.

The three sons of Shivlal initiated the action, out of which this appeal arises, on the averment that, upon the death of Shivlal, Premlata and Rajmati had transferred their interest in the moneylending business inherited by them along with their brothers to the latter. The plaintiff claimed Rs. 1,670 as principal and Rs. 601.20 on account of interest.

The defendant resisted the claim on serveral grounds. He denied that the daughters of Shivlal had transferred their interest in their father''s moneylending in the manner alleged and pleaded that the suit was not maintainable without impleading them as parties. He further pleaded that he had repaid Rs. 1,200 towards the loan. According to him, even the earlier promissory-note dated 7 October 1955 was executed for old debts consisting mostly of interest and that, since Shivlal was a moneylender and he had advanced the original loan in the course of his business, he was not entitled to any interest and costs of the suit because he had failed to comply with the provisions of the Moneylenders Act, 1934.

Both the Courts below held that Premlata and Rajmati were not necessary parties because they gave up their interest in favour of their brothers. They concurred in passing a decree for Rs. 1,200 after disallowing all interest claimed subsequent to 7 October 1955 for the failure of Shivlal to comply with the provisions of the Moneylenders Act.

Having heard the counsel, I have formed the opinion that the appeal should be allowed. The rules of law contained in sections 8 and 78 of the Negotiable Instruments Act are not applicable to cases where a promissory-note, a bill of exchange of any other negotiable instrument devolves by operation of law or is transferred to another by assignment. So, Broomfield J. observed in Shantaram Vithal Wakde Vs. Shantaram Bhagwan Sinkar, .:

But if the holder is dead, his legal representatives must, I think, be entitled to sue.... In my opinion, there can be no doubt about it. There is nothing in the cases cited, nor in the Act itself, as far as I can see, which is inconsistent with it. The Act regulates the issue and negotiation of bills, notes and cheques, but does not provide for the transmission of rights in such instruments by operation of law or by transfer.

In Zujya Pascol Damel Vs. Manmohandas Lallubhai Pratap, , Wassoodew J. observed:

The Act does not expressly exclude the doctrine of representative action. If a holder named is dead, a person claiming representation to his estate can bring a suit to recover the debt upon a promissory-note in the name of the deceased.

In Gulabgir v. Nathmal A I R 1932 Nag. 28 : 27 N L R 327., Bose A J C (as he then was) stated:

What the Negotiable Instruments Act does is to prohibit negotiation except in the manner specified by it but not to prohibit assignment in any of the several ways allowed by law.

It is, therefore, clear, and is also not now disputed, that, upon the death of the holder Shivlal, his heirs became entitled to sue for recovery of loan evidenced by the promissory-note dated 14 September 1958.

When the owner of a single right as the holder of a promissory-note dies and his right passes by devolution to his heirs, all of them must join in a suit to enforce that entire right as a whole. If any of them refuses to join as plaintiff, he must be impleaded as a defendant. The reason is that joint promisees cannot divide the debt among themselves and sue severally for parts of the debt. It follows that a suit to enforce the right by one or some of the promisees is liable to be dismissed: Kishan v. Chendha A I R 1924 Nag. 196.; Siluvaimuthu Mudaliar Vs. Muhammad Sahul and Others, .; AIR 1935 478 (Lahore) .; Munshi Sahu and Another Vs. Bhupal Mahton and Others, . and Shrikrishan Moolchand Vs. Deokinandan Sardharam and Others, .

The three sons of Shivlal, who brought the suit out of which this appeal arises, belatedly realised that they alone could not maintain it without showing how the rights of their two sisters in the debt became vested in them and, therefore, they pleaded:

2 (a) That in February 1960 at Itarsi the interest of all the daughters of the deceased Shivlal, if any, in the moneylending business was transferred to the plaintiffs out of love and affection and to maintain cordial relations between them and from that date the plaintiffs alone had interest in the claim in suit.

2 (b) That in the alternative it is submitted that all the daughters of Shivlal having been married thereby going out of the family previous to the date of the suit, they shall be deemed to have separated themselves from the coparcenary in accordance with explanation 2 of section 6 of the Hindu Succession Act, 1956, as such they have no right, title or interest in the claim in suit.

The plea that the daughters did not obtain any share in the debt be cause they must be deemed to have separated from the coparecnary by reason of their marriage is easily answered by the proviso to section 6 of the Hindu Suc cession Act, 1956. That proviso contemplates devolution of interest by intestate succession on certain females not because they are coparceners but on account of their relationship to the deceased either by affinity or by consanguinity. Since the point was not argued, it is unnecessary to pursue it further.

As already indicated, the Negotiable Instruments Act deals only with transfer by negotiation and leaves untouched the rules of general law which regulate the transmission of negotiable instruments by operation of law or by legal devolution or by assignment in writing u/s 130 of the Transfer of Property Act and their transfer as chose in action according to the general law. Having regard to the provisions of section 137 of the Transfer of Property Act which excludes negotiable instruments from the purview of the provisions of that Act relating to transfer of actionable claims, it has been argued on the one hand that no writing as contemplated by section 130 of the Act is necessary at all and an oral transfer is possible and on the other that any assignment of such instruments is not possible at all. According to D. F. Mulla, neither view is correct. He observes in his treatise on the Transfer of Property Act, 4th Edition, at page 739 as follows:

If the promissory-note is negotiable, some early cases supposed that the note could not be assigned as an actionable claim. But later cases have held that, even if the promissory-note is negotiable, it may be assigned by instrument in writing although such an assignment renders the assignee u/s 132 subject to the equities which the assignor was subject.

So, in Maihar Sahib Maraikar v. Kadir Sahib Maraikar I L R 28 Mad. 544. Sir S. Subrahmania Ayyar C. J., observed at page 54-J:

The fact that the note is negotiable does not make any difference except that it carries with it certain peculiar incidents attached to it by the law merchant- The rules in regard to these choses in action prior to the Act do not cease to be anytheless applicable to them by the passing of the Act unless its provisions expressly or impliedly affect those rules. If we now turn to the Act, so far as one can see, no provisions there constrain one to come to any other conclusion.

In Perumal Ammal by Mother and Next Friend, Krishnammal Vs. Perumal Naicker and Another, , Wallis C. J. observed:

The prevailing view of this Court is that negotiable instruments are actionable claims assignable under this section...........

In this connection, I may mention two other cases of the Madras High Court, namely, JVarayanamoorthi v. Vumamaheswaram A I R 1930 Mad. 197. and C.R. Venkatarama Ayyar Vs. B.S. Krishnaswami Chettiar and Others, (1) In the earlier of these two judgments, the difference of opinion between the earlier cases and the later cases was noticed. The latter view was accepted in Surath Chandra Saha Vs. Kripanath Chowdhury and Others, . and Ghanshyam Das Marwari Vs. Ragho Sahu and Others, , As shown earlier, the same view was taken in Gulabgir v. Nathmal A I R 1932 Nag. 23 : 27 N L R 327. In view of these authorities, it should be held that section 130 of the Transfer of Property Act applies to assignment of a promissory-note as a chose in action.

Although it was pleaded that the two daughters of Shivlal verbally transferred their interest in the moneylending of their father, including the promissory-note in this case, Premlata P. W. 1 and Rajmati P. W. 2 stated that they relinquished their interest in the moneylending. Unlike a surrender by a Hindu widow which accelerated succession, this was in law a conveyance and was, as pleaded, intended to be such because only in that way could the brothers claim to be entitled to the entire right to the promissory-note as whole. Since section 130 of the Transfer of Property Act applies, it could not be effected by parol. That being so, the suit brought by only some of the heirs of Shivlal must fail.

In the view I have taken of this case, it is not necessary to consider other points raised in the grounds of appeal.

The appeal succeeds and is allowed. The lower appeal Court''s decree is set aside and the suit is instead dismissed. However, in the special circumstances of this case, I direct the parties to bear their own costs throughout.